DeFi stands for decentralised finance. However, before we go into decentralised finance, it's important to note how centralised finance works.
In traditional finance, there are three major concepts to understand:
Institutions. Think governments, banks, hedge funds, financial services, pension funds etc.
Markets. Think NASDAQ, Craigslist, Uber, Airbnb
Instruments. Derivatives, loans, equity, debt.
At the core of all of these is currency. Bitcoin/Ethereum have removed the need for governments and financial institutions.
Tokens, as an asset class, have created new digital, global markets.
Decentralised finance has giving access to instruments to anyone with an internet connection!
When referring to decentralised finance, we broadly think of the following categories:
Lending that can be instantiated by anyone, anywhere
Payments that are cross-border from day one
Derivatives where no middle-men are required
Stable coins to ensure stable value
Decentralised exchanges to swap between assets easily and frictionlessly
All of the above are fully non-custodial and can be accessed by anyone, anywhere.
In our view, the DeFi market will continue to expand tremendously over the coming years. Below is an overview of the current state of the market.